"It isn't enough to have a trust fund any more," writes Rachel Emma Silverman in The Wall Street Journal (subscription). "The next step is to have your own trust company."A small but increasing number of the super rich are setting up their own trust companies -- boutique trust firms owned or controlled by wealthy families themselves. Some want more say over how their trust assets are handled; others want to consolidate a bunch of family trusts under one umbrella.
This isn't a game for the average trust-fund baby. Families typically should have at least $100 million to set one up, and most that do have at least $250 million. Experts estimate there are only a couple hundred private trust companies in the U.S.
Still, their numbers have increased in the past decade as trust lawyers begin to tout their benefits. John P.C. Duncan, a Chicago lawyer who specializes in private trust companies, is setting up 16 this year, compared with only five four years ago. The South Dakota Trust Co., Sioux Falls, which provides back-office and other services for private trust companies, is helping to administer 12 private trust companies this year, up from five last year.The last wave of private trust companies crested about a century ago, as the tycoons of the Gilded Age planned their estates. Bessemer Trust, for instance, was founded by Andrew Carnegie's steel-company partner, Henry Phipps.
A generation ago, Bessemer began seeking non-Phipps clients. Will a new wave of trust companies go non-private in this century?
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The wave of privatization may be slowed by the fact that the IRS has stopped issuing private letter rulings in this area.
The key questions tended to revolve around preservation of GST "grandfather" protections when a new, family controlled trustee took over trust administration.
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